Which of the following statements characterizes the nature of the long-run Phillips curve?
A) No event can shift the curve rightward because the curve can only be shifted leftward.
B) No event can shift the curve leftward because the curve can only be shifted rightward.
C) Only fiscal and monetary policy can shift the curve.
D) Demand-side policy CANNOT shift the curve.

Question

Which of the following statements characterizes the nature of the long-run Phillips curve?  
A) No event can shift the curve rightward because the curve can only be shifted leftward. 
B) No event can shift the curve leftward because the curve can only be shifted rightward. 
C) Only fiscal and monetary policy can shift the curve. 
D) Demand-side policy CANNOT shift the curve.

Quizplus · Accepted Answer

The long-run Phillips curve is vertical, indicating that there is no trade-off between inflation and unemployment in the long run. This means that demand-side policies, which are aimed at managing the economy's demand, cannot shift the long-run Phillips curve. The position of the long-run Phillips curve is determined by factors affecting the natural rate of unemployment, not by demand-side policies.

Which of the Following Statements Characterizes the Nature of the Long-Run